CITI & SECU short sale-no lien subordination

Short sale initiated with Citi & SECU.

Seller owes $124,000 - CITI $99,000 & $25,000 to SECU (State Employees Credit Union) FMV is $55,000. We got multiple offers and the seller accepted a $60,000 cash offer

We assumed Citi was in 1st position & SECU in 2nd. SECU said right up front that they would agree to short sale but would want a seller contribution/promissory note for difference.

CITI requested title work as soon as the SS package was submitted (we thought was strange) which we had title company submit. Citi said it woud negotiate with SECU.

Title Company informed us that SECU is in 1st position since 2003 because Citi did re-fi in 2005 and did not file for subordination of SECU lien. This means that SECU can get all of its money because they are in 1st position. Citi is proceeding as if CITI is in 1st position.

Property is 2nd home, was rental, tenants destroyed property and didn't pay rent. Sellers had to evict tenants. Sellers exhausted savings to pay mortgage during this process until they had no more funds.Property not rentable & needs extensive repairs. Sellers unable to pay for repairs. Both work for State of Marland and have curtailment of income because of budget cuts & furloughs.

Not sure how to proceed. What should we do now that we know loan positions?

Replies

Wayne Brooks April 17, 2013 at 8:21am

If Citi's 1st mtg. was released and no subordination was given by SECU, then you have no choice but to proceed with SECU as the first and Citi as the second. Citi may not cooperate, but they don't have to cooperate just as no second mortgage HAS to cooperate. If a subordination was executed, but not recorded, it could be recorded now and still be valid. Anything else seems like a waste of time.

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